Policy Briefs

Sustainability and Climate Action: Potential Actions to support Sustainability efforts

State of the Climate 2024 - Key messages

Stark warnings are coming from climate change experts about how close the world stands today to exceeding the level of temperature change above the pre-industrial level that will catalyze extreme climate events, raise sea levels, and place the population at risk.

Concentrations of greenhouse gases of carbon dioxide, methane and nitrous oxide reached unprecedented levels of 151%, 265% and 124% respectively of pre- industrial levels. Global temperatures have already reached new peaks and 2023 and 2024 are expected to be the two warmest years ever recorded, impacted by the El Nino effect. Over 175 years of observations, the decade of 2015 to 2024 will be the hottest ever.

The State of the Climate report notes that exceeding the Paris Agreement climate target of 1.5 deg C over pre-industrial levels does not depend on a single year and the average of 20 years needs to be examined. With different methodologies, global warming is estimated at about 1.3 deg C; however, the world cannot wait for 20 years to find out the extent of our actions on the planet’s temperature. Every point increase leads to further climate hazards and action to curb the warming must be taken in advance. This is visible in glacier loss, sea ice collapse, ocean temperature and sea levels, all of which stand at record highs for the last two years.

Extreme weather events are also rising, affecting the poor populations most of all, but even the developed countries are not immune to climate related disasters. According to the report, below average precipitation was seen in large regions of the world. Unusually high rainfall took place in the Sahel region as well North America, parts of Africa and the Arabian Peninsula as well as South Asia.

Extreme climate events such as droughts, floods, cyclones, heatwaves and cold waves were observed in most parts of the world. Catastrophic flooding in southeast US, hurricane Milton in Florida, very heavy rainfall in central Europe, flooding in Sahel, wildfires in Canada and Chile, Typhoon Yagi in southeast Asia and many other natural disasters caused high loss of lives, disrupted livelihoods and led to economic damages.

Food security affected global hunger which persisted at high rates over 2023. El Nino caused droughts that led to lower cereal availability and crop failures. Similarly, migration and displacement levels and damage to homes, infrastructure, forests, farmlands and ecosystems occurred during the year.

The 29^th session of Conference of Parties to the United Nations Framework Convention on Climate Change (COP29) was held in Baku, Azerbaijan on 11-22 November. The objective is to continue the discussions on how to keep global warming to the 1.5 deg C limit through emission reductions while leaving no one behind.

A major pillar of discussion was enabling adequate finance for climate change action and sustainable development keeping carbon emissions in the forefront. A climate finance target, the New Collective Quantified Goal on Climate Finance (NCQG) working towards providing financial support to developing countries for curbing emissions and fostering energy transition remained elusive. It is estimated that by 2030, developing countries, not including China, would need an annual USD 1 trillion in finance to help them strengthen their climate change actions.

The sustainability agenda goes beyond climate action to also include circular economy development, biodiversity preservation, pollution prevention and disaster management, among other priorities.

Innovation in sustainable action

Climate action efforts require initiatives by all countries to decarbonize hard-to-abate sectors. Business 20 (B20) during the Indian G20 presidency brought out a report on decarbonizing the emerging nations. The report illustrated decarbonization pathways for a few sectors in certain emerging economies and offered recommendations to catalyse future investments to prevent grey assets being locked in.

The sectoral pathways being presented as examples could significantly reduce emissions upon implementation and some projects already show profits while others need marginal to substantial support.

The report recommends mechanisms for deploying scalable solutions.

The mechanisms are summarized as follows:

1. 1. Align green taxonomy and carbon accounting standards for sustainable activities and for estimating carbon abatement potential using globally recognized standards.
2. 2. Institute currency hedging and climate insurance mechanisms (e.g., via bilateral swap lines and global climate insurance pools) to lower systemic risks in developing countries and reduce risk premiums.
3. 3. Establish investments and offtake agreements between advanced economies and developing country governments in line with Article 6 of the Paris Agreement.
4. 4. Establish country-specific green investment catalyzing platforms to scale small-ticket projects with medium to high IRRs.
5. 5. Create innovative financial structures to address systemic risks of large projects with viable returns by combining institutional capital with junior concessional capital for first loss guarantees in addition to de-risking mechanisms described in mechanism #2.
6. 6. Establish Green Investment Agencies (GIAs) in developing countries to enhance institutional capacity, mobilise finance and foster global collaboration for green projects.
7. 7. Reform development financial institutions/multilateral development banks (DFI/MDB) to enhance balance sheet capacity, incorporate sustainability objectives in their charters and expand leverage ratios with a focus on offering blended finance to catalyse private capital flows.
8. 8. Establish carbon markets in collaboration with government and regulatory bodies to fast track green investments and increase the flow of private capital towards otherwise unviable projects that are nevertheless socially critical
9. 9. Provide concessional debt finance (e.g., via DFIs/MDBs) to increase the attractiveness of projects with low returns but high social need to private investors via structured finance, syndicated loans and debt instruments.
10. 10. Provide grants, philanthropy or small ticket investments via a climate fund of funds to support climate research financing in developing countries via institutions in advanced economies.

If implemented well, these have the potential to advance the global decarbonisation agenda significantly by aiding implementation of the scalable projects to which they have been mapped.